AGRI Committee Meeting

STANDING COMMITTEE ON AGRICULTURE AND AGRI-FOOD

COMITÉ PERMANENT DE L'AGRICULTURE ET DE L'AGROALIMENTAIRE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, October 26, 1999

• 0904

[English]

The Chair (Mr. John Harvard (Charleswood St. James—Assiniboia, Lib.)): Members, I see that we have a quorum for hearing witnesses. It's about four minutes after nine o'clock, so I think we should begin our proceedings.

Today we are going to get into, among other things, the AIDA program, which has been talked about so much in the last several months. We have a number of officials here with us today who I think will be in a position to answer at least some or many of the questions members will have.

With us, from the Department of Agriculture and Agri-Food, are Douglas Hedley, who is the senior executive director, policy branch; Tom Richardson, director general, farm income policy and programs directorate; James Wheelhouse, director general, economic and policy analysis directorate; and Dan Foster, managing director of NISA/AIDA.

• 0905

I understand there will be opening remarks by Mr. Hedley, and then we'll be in a position to take questions.

I invite you to begin. Thank you again for coming. You are welcome. I'm sure we'll have an interesting session.

Mr. Douglas D. Hedley (Senior Executive Director, Policy Branch, Department of Agriculture and Agri-Food): Thank you, Chair.

Let me begin very briefly. You have done the introductions of the staff who are with me here today: James Wheelhouse; Tom Richardson; and Danny Foster, who is heading the AIDA and NISA administration in Winnipeg. I want to review the package of safety nets we have been using over quite a number of years. That package involves $1 billion: $600 million of federal money, $400 million of provincial money. That money is shared among a number of programs.

First of all, the federal money is the cash advances, or advance payments, if you wish, across Canada.

Second is NISA, and NISA is currently costing around $230 million a year federally. That is a demand-driven program; that is, the allocations by each province are done in response to the money put up by farmers in their NISA accounts.

Third is crop insurance. That program is currently costing around $210 million in federal money, which is allocated in relation to a formula that we have agreed to with the provinces on historic crop insurance costs.

Finally, there are the companion programs. We work these out individually with each province. That money is allocated by farm cash receipts by province. We can offer you a list of those programs, if you wish. It is a fairly detailed list. I don't have one here with me today, but we can get that for you, if you wish.

Last December the minister added another program for the two-year period, the 1998 and the 1999 crop years, or tax years, stabilization years. That program is AIDA, the agricultural income disaster assistance program. There is $900 million in federal money over the two years and $600 million in provincial money, making $1.5 billion over the two years. The program is essentially based on providing for coverage of some of the drop in gross margin of farmers as they go through downturns in prices or quantity on their own farms.

This morning, since Danny Foster is here, I would ask him to take you through a table of numbers in terms of the progress in making payments under the AIDA program and also to bring you up to date on where we are with the net income stabilization account balances.

The Chair: Go ahead, Mr. Foster.

Mr. Danny Foster (Managing Director, NISA/AIDA, Policy Branch, Department of Agriculture and Agri-Food): Okay. Does everyone have a copy of the schedule? It's called “Summary of AIDA/NISA Statistics”.

The Chair: I think so. Go ahead.

Mr. Danny Foster: Okay. I'll start off with the agricultural income disaster assistance program, starting with the number of claims received in all provinces to date, 51,542; the number of claims processed to date, 31,712—you can clearly see Saskatchewan having the largest number of claims filed with the administration, 28,761—the number of claims paid, 16,540; the total value of payments to date, $227 million; and the average value, at $13,725.

I would just point out that of the claims received, 51,542, especially in the provinces in which the federal administration delivers, those being Saskatchewan, Manitoba, New Brunswick, and Nova Scotia, with the deadline extension of August 20, 1999, we received 55% of our applications around the August 20 deadline, in the month of—

• 0910

An hon. member: Newfoundland was one.

Mr. Danny Foster: Yes, you're right. I'm sorry.

So we received 55% of our applications in the month of August in those four provinces.

Those are the numbers on AIDA as of October 25. We continue to process close to 1,500 applications a week. We are moving quite quickly on the payment applications. Because of the filing deadline of August 20 and the amount of contact that was required with producers and accountants to clarify information on their forms, the months of September and October presented a challenge for us. Most farmers were out in the fields. They filed their applications at the end of August, and then we were trying to contact them while they were busy doing their work out in the fields. So that slowed processing substantially. But we are now picking up again, because the producers are off their fields and they're starting to do their tax planning for 1999.

So we are making good progress on processing these applications. We're estimating that by the end of November we'll have 80% to 85% of the applications processed. Historically with farm income support programs, we've found that about 10% of the applications are what we call problematic. There's a lot of back and forth. They're very complex files, and they will take a longer amount of time. But we are making progress.

In terms of our current projection for 1998 payments, we're looking at $560 million to be paid out under the AIDA program. That includes Saskatchewan at about $160 million, and Manitoba at $57 million.

So those are the AIDA numbers. If I could just move on to the NISA numbers, then I'll take questions.

The net income stabilization account for 1998: the number of currently active participants in the program, 135,701; the total value of account balances in NISA as of October 25, $2.7 billion; funds available for immediate withdrawal—and that's based on their 1998 triggers under the program—$1.166 billion. For the 1998 stabilization year, 105,000 producers have access to $1.166 billion. To date, 24,891 of those producers have withdrawn $264.7 million from their account.

Now, basically what will happen over the next couple of months is that as producers are doing their tax planning for 1999, they will make their decision on whether to deposit for the 1998 stabilization year or withdraw funds for the 1998 stabilization year. So the next two months will be very active in terms of the NISA account.

As for deposits to date, about 25,000 producers have made deposits to the account and 25,000 producers have withdrawn from the account. That leaves us with about 80,000 producers still to do something for their 1998 stabilization year. Typically what they do is wait until they're doing their 1999 tax planning, so they're off the fields now and they're starting to sit down and look at the receipts, saying “Do I withdraw money from the NISA account, or do I deposit?”

Based on history, we're estimating that the actual withdrawals taken for 1998 from the net income stabilization account will run between $400 million and $450 million in terms of filing patterns by producers. So that will leave basically another $600 million of the funds available that will not be withdrawn for the 1998 stabilization year.

The Chair: Is that it?

Mr. Danny Foster: Yes.

Mr. Douglas Hedley: Yes.

The Chair: Thanks to both Mr. Hedley and Mr. Foster.

Now it's time for questions, please. We haven't done this for a little while, so I just want to remind members that in the opening round seven minutes are given to each questioner, and in subsequent rounds it's five minutes. The chairman will monitor the time very closely.

Mr. Howard Hilstrom (Selkirk—Interlake, Ref.): Mr. Chairman, I'd like to make a comment.

The Chair: Yes, Mr. Hilstrom.

Mr. Howard Hilstrom: Mr. Breitkreuz has to leave for the House shortly, but he would like to get a question in. I would like to have permission to let him ask his question, and then I'll finish off the time.

The Chair: If you want to share your time, that's fine with me.

Mr. Howard Hilstrom: Thank you.

The Chair: Go ahead, Mr. Breitkreuz. You have seven minutes.

Mr. Garry Breitkreuz (Yorkton—Melville, Ref.): Thank you very much.

I appreciate this information. I was rather shocked to look at the statistics that you handed out here. The farm crisis is most severe in the province of Saskatchewan, and yet when I look at the numbers I see that the average payout is the lowest in that province. How do you explain that?

• 0915

Mr. Danny Foster: In part, it's by the number of applications we've received. As you can see, we have had almost 29,000 applications. There is no application fee in the provinces where the federal government delivers. A lot of applications were filed on speculation, if you will. We have a lot of small payment claims. We have a lot of large payment claims. Overall, for people filing with an estimated $500 payment, if you will, in Saskatchewan...where the same person wouldn't file an application in Alberta because of the application fee.

So we have a lot of applications coming in that are speculative, if you will. There are people without payments and there are people with very low payments coming in.

Mr. Garry Breitkreuz: But you see, my point—and I don't know if you realize what it is—is that the crisis is most severe in the province, so obviously the funds aren't getting out to those people, because the average payment is the lowest. There seems to be a contradiction in what I'm hearing.

Mr. Danny Foster: The total dollars that go out will be highest in Saskatchewan.

Mr. Garry Breitkreuz: In total dollars.

Mr. Danny Foster: Yes. The total dollars paid out under AIDA for 1998 will be highest in Saskatchewan.

Mr. Garry Breitkreuz: Of course the province depends largely on agriculture. That's your largest agricultural sector, probably.

At any rate, thank you.

The Chair: I think Mr. Hedley wanted to respond to that as well.

Mr. Douglas Hedley: If I may, the income crisis you allude to is felt, yes, in Saskatchewan and Manitoba. It is felt all the way across Canada to different degrees.

For example, in the hog industry, we watched a precipitous fall in prices in the fall of 1998. They have not recovered to the degree that one would expect under normal market circumstances. That affects those provinces with a high hog population, if you wish. Similarly, the shortfall or decline in grain prices affects those areas that produce grain other than just Manitoba and Saskatchewan. So it is Canada-wide, but there is a concentration in Saskatchewan.

Mr. Howard Hilstrom: I'll take over now, Mr. Chairman.

The Chair: Okay.

Mr. Howard Hilstrom: The difference, of course, is that the hog industry had a high three-year net margin on which to base that drop, and the commodity-sensitive export of grain, with the low prices there, is the reason that farmers are not getting a decent payout, reliant on the export of grains. That's what the problem is, and that's what AIDA has not addressed.

We'll go around this a little bit more, but I want to clarify something here. You indicate that cash advances are counted as part of the government's support for agriculture. How can a repayable cash advance be counted as government support? To me, that smacks of deception to the city dweller who sees this figure as being larger than what is actually being given to farmers by way of domestic support.

Do you have a comment on that?

Mr. Douglas Hedley: In the advance payments program, the government's support is for the forgone interest on the advance payments. A farmer with grain or any commodity in storage, for example, under the program can get a loan that is repayable when they deliver the crop. The federal government pays the interest on that loan while it is outstanding and before the crop is delivered. That is the cost to government.

Mr. Howard Hilstrom: Is that forgone interest in the neighbourhood of $350 million, then?

Mr. Douglas Hedley: No.

Mr. Howard Hilstrom: Because the stats I got from agriculture department operations show that government support is in the neighbourhood of $650 million for NISA and crop insurance. That leaves me with $350 million to bring it up to your figure of $1 billion, which you're telling people is federal government support for agriculture.

Mr. Douglas Hedley: The cost of the advance payments program normally runs around $25 million or $30 million per year. It is in our main estimates as a nominal item at $40 million.

Mr. Howard Hilstrom: So where does the $1 billion come from, then, in agriculture support?

Mr. Douglas Hedley: If you look at the federal moneys, we have a nominal line in our estimates, as I indicated, of $40 million for the cash advances. We spend, as federal money, out of our $600 million, about $230 million on NISA.

For crop insurance, I believe, Tom, the numbers are around $210 million, and the balance is in companion programs.

• 0920

Mr. Howard Hilstrom: Such as?

Mr. Douglas Hedley: The agrifood development program in Saskatchewan, for example. It is also used to fund other parts of the safety net—SDRM in Ontario, for example.

Mr. Howard Hilstrom: My time is just about up. Could you provide us with a sheet of those?

Mr. Douglas Hedley: Yes, we can.

Mr. Howard Hilstrom: I would appreciate that.

Mr. Douglas Hedley: I can't today, but I would be happy to.

Mr. Howard Hilstrom: I appreciate that—not right now.

Mr. Garry Breitkreuz: What you've given us is less than half of $1 billion.

Mr. Douglas Hedley: Excuse me, the numbers I have been giving are federal expenditures. Out of $600 million...the provinces join with us on a 60-40 cost-sharing relationship to get the total package to $1 billion.

Mr. Garry Breitkreuz: So you're talking total.

Mr. Douglas Hedley: Only federal.

The Chair: The total number is $600 million. He's giving you the breakdown of the $600 million, not the other $400 million, which comes from the provinces.

Madame Alarie.

[Translation]

Ms. Hélène Alarie (Louis-Hébert, BQ): Good morning. First of all, I'd like to talk about the AIDA program. On looking at the table, it's clear that no applications were received from Quebec, since it has its own ASRA program. I often wondered if this program was effective enough, and when we managed to weather the crisis in the hog industry, I realized that indeed it was. However, in order to implement this program, the province had to make some choices and commit fully to this initiative. I believe a total of $700 million will be paid out this year to assist producers. However, the fact remains that producers were paid first and then the government went out and found the money it needed. In this respect, the agreement was a very good one and the province avoided similar crises unfolding elsewhere. The crisis faced by Quebec's hog producers could have been as serious as the crisis we're now seeing, but when it comes to agriculture, we stand united in our support of the industry.

Ever since I first heard the AIDA program mentioned, I have had the impression that it was devised by some bureaucrats and that no effort was made to find out what producers are truly experiencing. This summer, I phoned some friends living in Western Canada to find out how they were doing. They told me they had to hire an accountant to complete the application form because the fiscal year no longer corresponded to the crop year. Already, they were facing the prospect of having to pay out approximately $1,000. Their parents, who were better off, could afford the added expense, but young farming couples expressed to me their concern about seeking assistance under the program, fearing that they might not be eligible for relief because they were borderline cases.

This is a tragic situation. It seems to me that the provinces or farm bureaux should be able to help farmers who are in desperate, if not dire straits. It's not my impression that we're addressing the problem of farmers. Their plight is desperate because when things start going badly in agriculture, they tend to get worse. Moreover, farmers have had to contend with a number of so-called ecological or natural disasters.

Two factors have come into play: on the one hand, nature has not cooperated and on the other hand, commodity prices are low. I don't think we can ask people who are at the end of their rope to make even a little extra effort. Have you ever asked yourself if the provisions of this program are geared to the crisis currently unfolding in the industry?

[English]

Mr. Douglas Hedley: If I may, Mr. Chairman, first of all, the design of the AIDA program really was a product of about two to two and a half years' work through the National Safety Nets Advisory Committee and with the provinces. I recall as well that the Government of Alberta ran the FIDP program, the farm income disaster program. Now I think it's in its fourth or fifth year. We began on a national basis with the AIDA program modelled after it. Similarly, British Columbia has been in this program for some time. Again, it was developed with farmers in those provinces.

Prince Edward Island as well has been running the program for a number of years, developed and designed with farmers. As far as I know, the National Safety Nets Advisory Committee, through the Minister of Agriculture and Agri-Food, fully supports the AIDA program.

I appreciate your concerns on the complication of the program, but at the same time, if we are going to target our programs to those in need, we do need the background information from each farm. Young farmers are not disadvantaged by this program, because we have mechanisms, if they don't have long periods of averages, to deal with that in the administration of the program.

• 0925

I agree with you that natural disasters appear to have been occurring more frequently. Certainly the flooding in southwest Manitoba and southeast Saskatchewan is quite unusual. It's a 100-year phenomenon, if you wish. But that is precisely what these programs are designed to deal with.

[Translation]

Ms. Hélène Alarie: I have two more brief questions. An advisory committee recommended that the program take into consideration negative margins and that there be no maximum imposed. Why weren't these recommendations taken into account?

My second question is of a technical nature and concerns the table that you distributed to us. I see that in Saskatchewan, for example, 17,000 applications have been processed and compensation has been awarded in 7,000 cases. What is the status of the other 10,000 applications? Are they still being processed? Or have they already been processed and producers are awaiting payment. Or, have these applications been rejected because producers were deemed ineligible for compensation? If 28,000 people apply for assistance, how many are going to receive a cheque when the dust settles?

[English]

Mr. Douglas Hedley: First of all, with regard to negative margins, there was a great deal of concern when we were initially designing the program that if we were to go into negative margins, it would negatively impact crop insurance, essentially replacing crop insurance, a program we have had for many years.

In hindsight, I think I can say that since all of the crop insurance decisions have been taken for 1998 and 1999, there is no concern about the current program affecting crop insurance. If the program continues into the future—and I repeat, if it does—I think we would need to worry about how one integrates AIDA with crop insurance and, if negative margins were covered, how one assures that one does not undermine the crop insurance program or, for that matter, the AIDA program.

With respect to the numbers you're asking about, I would ask Danny Foster to respond to that, please.

Mr. Danny Foster: Specifically with respect to Saskatchewan, the difference between the number of claims processed and the number of claims paid are the ineligible claims. So there are 10,500 ineligible claims out of those 17,000 that have been processed.

We are currently projecting that at the end of the day, 14,400 producers will receive payment in Saskatchewan. The total number of producers receiving payment under the program is about 30,000. So Saskatchewan will represent close to 50% of the total number paid.

The Chair: Thank you.

Mr. Calder for seven minutes.

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Thank you very much, Mr. Chairman.

This thing with Saskatchewan really interests me. I was out there this summer, in Regina and Yorkton, just to get a really good feeling for what was going on.

With regard to AIDA, you have here that there were 28,761 claims, and then of course the number of claims paid out to date is only 7,000. So only a quarter has been paid versus what's been applied for.

You've said that's largely due to the fact that they've been out in the fields, and that should improve now. But the whole thing I see here, with the total value of payments right now at $227 million.... It's my understanding that about $70 million went to ASRA, into Quebec. This gives you a figure of around $300 million, which is only a third of the possible payout.

I'd like you to comment on why there hasn't been more paid out now. Is it because we're running into a problem with the averaging process? Should we be looking at the best three years out of five instead of the way we're doing it right now? Should we be looking at adjusting year-ends? There seems to be a problem here.

• 0930

The other thing with Saskatchewan that really confuses me is the fact that under NISA, the total number of active participants is the highest of any of the provinces, at 55,898, and the fund is available to 43,842, yet only 12,541 have applied. They had the lowest payout of all the other provinces under NISA. Why?

Mr. Douglas Hedley: First of all, going back to what Mr. Foster said earlier, let's recall that where the federal government is delivering this program, Manitoba and Saskatchewan, in terms of your questions, there is no fee for application. By having no fee, we have received a larger number of applications on speculation, as Mr. Foster indicated, than one would find in a province like Alberta, where there is a healthy fee.

The Chair: What is it, $500?

Mr. Danny Foster: Up to $450.

Mr. Douglas Hedley: In doing that, what you find is that they're paying on four-fifths or nine-tenths of the claims that come in, whereas in our case we're not paying that many.

In terms of the averages, one would not expect that average to differ substantially from other provinces so long as the farm sizes are roughly the same on those claims. Why would one expect huge numbers in Saskatchewan and much smaller numbers in another province? It affects more people in Saskatchewan. It doesn't change their farm size. As a result, that average simply reflects the structure of farms in Saskatchewan.

With respect to the average period for the references, we considered when we started the program whether we should use either the three preceding years or the so-called Olympic average, the five-year average, throwing out the high and the low. The Olympic method is a good deal more costly for both the farmer and for the government in terms of administering the program. You need two more years of data. You also need more data per year than you would with a straight three-year average. As a result, the National Safety Nets Advisory Committee recommended to us that we stay with the three-year average.

Does it make much difference if we were to go to an Olympic average? A little bit, not a large number. I guess we would have a worry if we considered other averages, allowing farmers to flip back and forth each year. They would be forced to make a choice over a longer period of time for that average.

Mr. Murray Calder: If you just have three years that you're reaching in, and say for instance you take a look at the averaging and those three years have been three bad years, the payout is going to be a bad payout.

Mr. Douglas Hedley: Yes.

Mr. Murray Calder: Whereas if you go to a five-year average, you've got more of a time span you can reach into. If you take the three best years out of the five, then obviously the payment is going to be a little bit higher. That could be reflective of why we've only paid out one-third in this program so far.

Mr. Douglas Hedley: Yes. First of all, the National Safety Nets Advisory Committee has told us and many provinces very, very clearly that they would like to keep the program green within annex two of the WTO agreement. That gives us only two choices on the average: one choice is the three preceding years, and the second choice is the Olympic average, a five-year average, throwing out the high and the low. Those are the only two options we have.

If you go to a much longer average, yes, you will capture the higher years of the mid-1990s. There will be times in the future when one may want a much shorter average. To keep the program green, we had to make the choice between the two. We made it on the three preceding years because it doesn't make a lot of difference in terms of the total payout and because it's administratively less costly for both farmers and government in doing it.

• 0935

The Chair: Thank you very much.

Now we go to Mr. Proctor, five minutes.

Mr. Dick Proctor (Palliser, NDP): Thanks very much, Mr. Chair.

Gentlemen, it's good to see you here this morning.

These numbers are all very interesting, but what they clearly tell me is that the program is not working in Saskatchewan and Manitoba. I recall that when the minister was at the grain growers convention in Regina last November, he forecasted that the problems were going to be in those two provinces in 1999. That was before the AIDA program was even announced, let alone the details, which came out in February.

What do you gentlemen think are the primary reasons for the fact that it's not working in Saskatchewan, that 55% of applicants aren't qualifying? It's a little bit higher as I look at the numbers in Manitoba, about 57%.

Mr. Douglas Hedley: First of all, let me repeat that when you have no fee for the program, what we find is that just over half of the applications are put in based on speculation. Where we do have a fee for the program—such as in the Alberta case—what you find is that a much smaller proportion do not receive payment.

Mr. Dick Proctor: If I could just interrupt, you use the word “speculation”. There are a lot of farmers I've spoken to who feel they are deserving of support. They think they've had three pretty crummy years and that their net farm income is way down. And they would also submit that having to hire an accountant, as they invariably do, to pay $250 to $400 to put in an application.... They think they are putting some money up front only to have it rejected later on. So they would disagree very much with your terminology, Mr. Hedley.

Mr. Douglas Hedley: I would just point out that when we review the NISA program, what we find is that historically about 80% of the farmers use accountants to prepare their NISA applications. As far as I can tell, that number is running about the same for AIDA. So it is not a surprise that they are using accountants to do it.

Mr. Dick Proctor: If the program continues, will you...? It seems to me that the Minister of Agriculture is hinting that he may look again at negative margins, including those. That's something the Canadian Federation of Agriculture has been very adamant about. They've been very critical of the AIDA program because negative margins aren't in there. I'd like your thoughts on that aspect of it, please.

Mr. Douglas Hedley: I'm sorry, I can't speculate here on whether or not negative margins will be covered. I'd be happy to help you out in discussing negative margins. What would your question be? I'm sorry, I can't speculate on whether or not the minister will go there.

Mr. Dick Proctor: Why do you think it is that the Americans can have an acreage payment but we won't consider that on this side of the border?

Mr. Douglas Hedley: First of all, the history of U.S. farm policy is that there are direct payments to the grains and oilseeds industry historically. That has been going on for a very long period of time, with no payments to other parts of their industry—the livestock industry, for example. A year ago there was a small payment made to the pork industry, and that was the first time in my recollection of the U.S. government doing it.

In Canada, what we have attempted to do is target our payments and to make sure that they are equitably treated by risk across Canada, by province and by commodity. That gives you a very fundamentally different structure of farm programs designed to those bearing the risks in agriculture.

The new program in the United States clearly is heavily weighted to the grains and oilseeds industry. Again, there is a small quantity for other things, like market development, as usual in this program.

Mr. Dick Proctor: It's probably weighted that way because they know that's where the problems are, and we know that's where the problems are on this side of the line.

• 0940

I don't know how the government can insist that we have a level playing field and keep talking with that kind of jargon when in fact we can't have an acreage payment on this side but they can. You can call it whatever you want, but you can't call it a level playing field when one side has different sets of rules than the other side. We don't seem to be prepared, willing or able to take any action, even though those mechanisms apparently exist.

Mr. Douglas Hedley: First of all, it is not just grains and oilseeds that have been hit by this downturn in commodity prices. It is in part driven by four back-to-back very good years in grains and oilseeds around the world as well as by lower demand, which is really the biggest single cause of this drop in prices. However, I think it's also fair to say that if one bases it on acreage, it would be quite difficult to then work out an equivalent payment on an equitable basis for other commodities that are not crop-based, if you wish, like livestock, for example.

The third point I would make very clearly is in regard to across-the-board payments the way the U.S. is doing them. If Canada were to do that, we would indeed provoke trade action by other countries—particularly the United States—which could involve all of agriculture. By helping one sector as you've proposed, we would essentially be placing a very heavy tax on all of it.

The Chair: But the Americans can do it, though.

Mr. Dick Proctor: Exactly.

Mr. Douglas Hedley: Yes, they can.

The Chair: Why?

Mr. Douglas Hedley: In part because we are dependent on them for selling much of our product. We do not import a lot from them. A vast share of their product goes abroad, not into Canada.

The Chair: So this is the American advantage?

Mr. Douglas Hedley: Yes, it is.

The Chair: It's a bit galling, isn't it?

Mr. Douglas Hedley: Yes, it can be.

The Chair: Mr. Borotsik.

Mr. Rick Borotsik (Brandon—Souris, PC): Mr. Chairman, as a clarification of that, we do import a substantial amount of agricultural products from the United States.

Mr. Douglas Hedley: Yes.

Mr. Rick Borotsik: Make no mistake about that. It's almost dollar for dollar, and we have a bit of a trade surplus right now. When you say we don't import from them, that's in fact a fallacy. We do import a substantial amount of foodstuffs.

I have a couple of points. Just let me get this straight: 51,000 claims have been submitted, correct?

Mr. Danny Foster: Right.

Mr. Rick Borotsik: Of those claims, 31,000 have been processed and 16,000 have been paid. You had estimated $560 million, Mr. Foster, to be distributed in 1998.

Mr. Danny Foster: Right.

Mr. Rick Borotsik: If you look at the numbers, we have another 20,000 claims to be processed. If you look at the percentages, 10,000 will be denied. How can you come up with $560 million for paying out another 10,000 claims? We already have $227 million expended, so you have another $300 million there. Are 10,000 going to get $300 million?

Mr. Danny Foster: A much higher proportion of those 20,000 that have to be processed, especially in Saskatchewan and Manitoba, will be payment files or payment claims.

Mr. Rick Borotsik: So you're saying that the same percentage isn't going to work—

Mr. Danny Foster: That's right.

Mr. Rick Borotsik: —that the one-to-one denial right now isn't going to be in those 20,000?

Mr. Danny Foster: That's exactly right.

Mr. Rick Borotsik: Why? Have you held these back?

Mr. Danny Foster: No. These are the ones for which we're seeking clarification from the producers in terms of the information they've submitted. These are the higher payment files.

Mr. Rick Borotsik: So your estimate is $560 million—

Mr. Danny Foster: That's right.

Mr. Rick Borotsik: —and that's with both federal and provincial contributions.

Mr. Danny Foster: Yes.

Mr. Rick Borotsik: The proof will be in the pudding, and I'm sure we'll get the final numbers.

Mr. Danny Foster: Yes.

Mr. Rick Borotsik: Speaking about claim processing, is there a direction from your department saying that if the claim is a substantial claim or a higher claim than average it takes special treatment to process that claim? I'm not just saying simply special verification—and obviously from an accounting perspective. Do your verifiers look at special ways to perhaps reduce that claim?

Mr. Danny Foster: No. If it's a higher payment claim, we want to make sure the payment amount is accurate. We're talking about taxpayers' dollars here and it's incumbent upon us to make sure we're paying the right amount. A higher payment claim—

Mr. Rick Borotsik: How much is it incumbent upon you? Is there a special process for those higher claims? Is it incumbent upon you to put them through a fine-tooth comb?

Mr. Danny Foster: Mr. Borotsik, we have levels of verification. If we have a $500 claim, we're not going to spend $1,000 verifying that claim. If we have a $40,000 claim, which we have a number of, we will spend more time and money looking at the claim.

Mr. Rick Borotsik: More verifiers' time will be put in on it.

Mr. Danny Foster: Right.

Mr. Rick Borotsik: Speaking of which, how many verifiers do you have in the Winnipeg department?

Mr. Danny Foster: We have 240 people working in operations. That also includes the toll-free lines.

• 0945

Mr. Rick Borotsik: Okay. Do you have any handle on administration costs?

Mr. Danny Foster: For this year we're estimating $20 million.

Mr. Rick Borotsik: That's $20 million in administration costs to put out some $227 million at the present time, but $560 million is being suggested.

People have commented to me that there seems to be an inconsistency in the interpretation of rules—that in fact your department sends, on a fairly regular basis, an interpretation of rules that has been used in previous applications, and now the rule is being interpreted in a different fashion. Is that in fact correct, or is that maybe a nebulous comment being made by some of the applicants?

Mr. Danny Foster: It depends on the person who is looking at the file. There is some judgment involved in assessing each file. As much as possible we provide training. We provide operations manuals with procedures to all our staff, and we train the staff on that. But there is some subjective assessment.

Mr. Rick Borotsik: So an applicant could in fact get a more lenient verifier or a somewhat less lenient verifier, depending on the luck of the draw as to who the verifier is? Or does more than one verifier look at a file?

Mr. Danny Foster: No. Basically what happens is a verifier will do the work on the file, and we'll go through a quality assurance process to make sure we are consistent in the applications of the procedures to reviewing these files. Our objective is to treat all producers equitably under the program.

Mr. Rick Borotsik: That would be nice, but it doesn't seem that's happening.

I deal with a lot of accountants, as I'm sure you do, Mr. Foster.

Mr. Danny Foster: Yes.

Mr. Rick Borotsik: They have some serious reservations about the program and how it's being administered. In the fit-up program right now, a complete accounting is sent out to the applicant—a complete accounting—as to the eligible incomes and the eligible expenses. When you come to the final number, the amount that's being processed, they can see where their numbers may be different from where the fit-up is.

I'm told that when a cheque goes out—the limited cheques that have gone out on the AIDA program through Canada—that isn't there; they don't have a complete justification as to the numbers that were submitted, the numbers that were utilized, and how they were put together with the AIDA program. Do you intend to do a better accounting process?

Mr. Danny Foster: Well, that's something we want to look at. We do send out to all producers a confirmation of what their final reference margin was, their claim year margin, and that type of thing.

Mr. Rick Borotsik: And those numbers don't jibe.

Mr. Danny Foster: But in terms of the adjustments, we're on the phone with every producer, and we discuss with them how the file was adjusted. So there's verbal contact with each producer when they're working through the file.

Mr. Rick Borotsik: But it's not submitted in a final statement?

Mr. Danny Foster: At this point there is no final statement.

Mr. Rick Borotsik: Is there an appeal process?

Mr. Danny Foster: Yes, there is.

Mr. Rick Borotsik: And how does that appeal process work? Is it not with another verifier from your office?

Mr. Danny Foster: No, that goes through an independent producer review panel.

Mr. Rick Borotsik: Who sits on it?

Mr. Danny Foster: Right now we haven't named the people.

Mr. Rick Borotsik: So there haven't been any?

The Chair: It's only on paper, right?

Mr. Danny Foster: That's right.

The Chair: You haven't implemented it yet.

Mr. Danny Foster: That's right.

The Chair: How close are you to it?

Mr. Danny Foster: We're probably within a month.

The Chair: A month.

Mr. Danny Foster: Yes. We don't have a lot.

The Chair: Thank you, Mr. Borotsik.

Mrs. Ur, you have five minutes.

Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.): Thank you, Mr. Chair.

I thank you for being here, because we certainly have had many a question over the summer, let me tell you, on AIDA.

Are the application forms the same whether they're federally run or provincially run?

Mr. Danny Foster: No, they're quite different. Actually the application form for the federally run program is much shorter. For 90% of our producers, it's seven pages. It's much shorter, because we have all the producers' historical income information through the NISA income tax form initiative. So there is a substantial difference between that and a package from Alberta, for instance, or Ontario. The federally run package will be quite smaller.

Mrs. Rose-Marie Ur: So that is why the application fee varies from $100 to $400 in Alberta to have it completed? I've not heard that concern in other areas, but it appears to be a concern out west.

Mr. Danny Foster: In terms of the application fee?

Mrs. Rose-Marie Ur: Yes.

Mr. Danny Foster: The decision of charging an application fee is a decision by the Alberta government for their administrative costs. Alberta administers the program in that province.

Mrs. Rose-Marie Ur: Is there a difference in processing time, whether it's federally or provincially administered?

Mr. Danny Foster: At this point I couldn't tell you.

• 0950

Mrs. Rose-Marie Ur: That is something I'd be interested in seeing.

I'm switching to Ontario, of course, because I'm from Ontario and that's where the concerns have been directed most often. What we've had happen in Ontario is that the farmers have put in a speculative figure as to what may happen down the road, and they are given a cheque—quite quickly, they think—from the provincial government. Then all of a sudden when their data is in, when they have to submit for the remainder, lo and behold, sometimes there is a request for a refund, and all of a sudden the federal government are the big, bad boys or girls.

Could you explain to me how the dollars are initially put out through the Ontario program, whether it's federal dollars or provincial dollars and how it is actually put together for Ontario?

Mr. Danny Foster: In Ontario, for the 1998 stabilization year, under their Ontario whole farm relief program they made an advance payment at 40% of the estimated total payment under the AIDA program. So under their provincial legislation, if you will, they made an advance payment to producers, asking for numbers that were speculative in nature, and they advanced the 40% to producers. Then they came back when the full amount.... Doing the full calculations, the producers had filed their tax forms. They came back and asked for supplementary information to make sure they had the right numbers, that they were making the right payment amount. They made the full payment at 100%.

Mrs. Rose-Marie Ur: But it wasn't really provincial dollars versus federal dollars; it was a mix of both.

Mr. Danny Foster: That's right. At the end of the day, it's 60-40, the 60% being federal of course.

Mrs. Rose-Marie Ur: Okay, because that has been lost in the process in Ontario. So we didn't do a very good selling job there.

I find it very interesting this morning that.... We certainly know how good we have adhered to our NAFTA rules and regulations. We're very cognizant of the fact that we have to live by the green programs, but I've never heard before that we have to really make sure, because they're our trading partners and we have to bow and bend. I find it a little scary that this is the interpretation the officials here this morning are signalling. Or maybe I misinterpreted what you had said, Mr. Hedley, that we have to be ever so careful. They seem to sling money at their farmers any old time, and we just kind of sit by. We don't have those kinds of dollars, I realize that, but we seem to be indifferent to the cause...that we can't say anything.

This is what really aggravates the farmers. We have the best farmers anywhere, but we don't have the treasury to add to our farmers' incomes like the United States or even the Europeans do. So I was a little taken back when I heard what I heard this morning.

Mr. Douglas Hedley: Mrs. Ur, the comment I made was essentially that we send a good deal of raw product to the United States, whether it be grain, livestock or meats, as well as finished product. Yes, we import a lot of product from the United States, but it's a small proportion of their overall market that we're importing. That makes us vulnerable to U.S. trade action; it always has. As a result, yes, the U.S. can do that to their grain farmers. We simply don't import enough grain to have much standing or reason to take them to the World Court over it.

So yes, we are a bit helpless on that one. That's why we worry about going into the WTO with a position that says we have to get that level playing field. The minister has been very clear about it. The Minister for International Trade has been very clear about it. Our position going into Seattle in December is very clear. We have been working with Washington on these issues for a lot of years and we'll continue to do so. That is the place to solve the problem, not competing subsidies.

The Chair: Thank you.

Mr. Casson, for five minutes.

Mr. Rick Casson (Lethbridge, Ref.): Thank you, Mr. Chairman.

The fact that the Americans have got the money out of their farmers and it's in their pockets and they're using it somehow puts our guys at a further disadvantage, does it not? Just across the border—neighbours, in many cases—some are receiving funds that help them keep going, and the guys on our side are being turned down. I think that just compounds the problem.

Mr. Douglas Hedley: One must understand that the history of U.S. programs provides for base acres of the named crops in their programs, and it has for many, many years. The U.S. maintains that administratively on every farm in the United States, in 3,500 counties. It is an extremely expensive program to run. Those payments are also based on the 1995 base, I believe. It'll be the 1995 or 1996 base. It is an historic base, not a moving base, in terms of who gets the money.

• 0955

It's in the grains and oilseeds. That does not cover hogs. It is only in the named commodities.

Mr. Rick Casson: It seems that the projections for returns on commodities are going to remain low. The AIDA program has been put in place, but have you looked at a long-term program that could be started that would take the place of all these ad hoc programs, so that when we do have these dips, the program is there, so it will cover off the shortfall without our having to go through what we're going through right now? Are you working on something to that end?

Mr. Douglas Hedley: We are working at two levels on that issue and have been for some time. First of all, the safety net agreement we have with the provinces runs out next spring. We have been working with the provinces at official and ministerial levels for two years to renew that agreement in terms of the programs farmers need to reduce the risk on their farms.

The second is that we have been working with the National Safety Nets Advisory Committee, and most provinces are working with their own advisory committees on safety nets, to develop the kinds of programs we need as we go out into the future. The National Safety Nets Advisory Committee is supportive of the mix of programs we have now. Indeed, I'll be meeting with them on Thursday and Friday of this week, when they're in town, with most of the agenda spent on where we go in the long term.

Mr. Rick Casson: I think that's the answer. I suppose the other answer is the next round of WTO negotiations, to really be firm on our position as a country—

Mr. Douglas Hedley: Yes, it is.

Mr. Rick Casson: —to get this playing field as level as we possibly can. I encourage you to do that.

As for the people who have been rejected here, you've processed 31,000 claims and 16,500 have been paid out. Half of the people who are applying obviously feel they have a need or they wouldn't apply. What are their options now?

Mr. Douglas Hedley: Within the AIDA program, that process is complete. They also have recourse to NISA accounts, if and when they exist. Third, if they are in very serious financial trouble, we have the farm debt mediation consultation service, which they should be visiting in terms of looking through their books, looking at whether or not the farm can be viable in the longer run. It is a service that we do provide to all farmers.

The Chair: Thank you, Mr. Casson.

Mr. Hedley, have you and your officials been surprised by the extent and intensity of the outcry against AIDA?

Mr. Douglas Hedley: I guess there are no surprises, Chair, in safety nets. I would point out that there is concern being expressed in Saskatchewan and Manitoba, but we are not hearing that same concern in other provinces, certainly not to the degree that we hear in the east side of the prairies.

The Chair: Let me try something on you that might or might not be analogous.

Automobile engineers design cars before they're put on the market, and before that's done, of course, they test-drive those cars and they make absolutely sure all their assumptions are correct before the cars are put on the market. Did anybody ever think of test-driving AIDA before you put it out onto the market? Did anybody think of gathering up maybe a hundred selected farmers from a good cross-section of the farming community, put them in a hotel for a week, and test-drive this program to determine whether the assumptions that were put together by you, the engineers, were actually correct?

• 1000

Mr. Douglas Hedley: Chair, we spent a great deal of time with the Alberta and Prince Edward Island governments, who already had programs of this type running. We spent a great deal of time with the National Safety Nets Advisory Committee, field-testing with them this design, if you wish, in detail. Furthermore, we went through quite a number of focus groups involving farmers across Canada.

The Chair: In the focus groups, were they asked to fill out the forms, for example?

Mr. Danny Foster: No, they were not specifically asked to fill in the forms but to go through them and comment.

The Chair: They didn't have to go through the process.

Mr. Danny Foster: Right.

Mr. Douglas Hedley: As well, I would point out that since the forms have come out, we have run quite a number of focus groups in Manitoba and Saskatchewan and elsewhere where we are administering the program. I believe over 6,000 farmers have now gone through that process in the two provinces in the west.

Mr. Danny Foster: Those were information sessions, but we did also conduct focus groups in Manitoba and Saskatchewan on the 1999 interim payment form.

The Chair: I would assume, then, if you think you did test-drive or field-test the program properly before it actually was put out on the market, that you wouldn't have been surprised. If the test-driving was done properly, all of the outcry that has occurred would have been heard before it was ever put out on the market.

You can't have it both ways, Mr. Hedley. It's either one or the other.

Mr. Douglas Hedley: We did not hear the concerns as we went through the test-driving, as you refer to it.

The Chair: Well, maybe the test-driving wasn't done properly, then. Maybe it wasn't done properly.

We shall move on. Mr. Knutson.

Mr. Gar Knutson (Elgin—Middlesex—London, Lib.): Thanks very much, Mr. Chairman.

I'm new to the committee, so I apologize if these questions seem rudimentary.

My sense is that if you're a hog producer in Ontario and you've had two really good years and then you spike down and have a really bad year, you get a lot of money from this, anywhere from around $100,000, but if you're a long-suffering prairie grain farmer and you've had three really bad years, you don't get any money from this. Have I got that right?

An hon. member: You've got it, yes.

Mr. Douglas Hedley: By and large, that's right. If you have low margins in your reference period, you will not get much out of the AIDA program.

I would point out that Saskatchewan came through virtually three years of record realized net farm income prior to this program. And yes, there are still some with low references throughout that period.

Mr. Gar Knutson: So we haven't had a long-suffering grain farmer in Saskatchewan. Is that what you're telling me?

Mr. Douglas Hedley: There are some, there is no question of that. Their margins started down in the mid-1990s, during the high price period. They have not come back up. They have gone down further in 1998 and 1999. There is no question of that.

Mr. Gar Knutson: Was that because of weather?

Mr. Douglas Hedley: I don't think you can say there is one or even two reasons for it. You would have to look at every individual case. Certainly some of it is weather related or disease related or price related or the wrong choice of crops in hindsight. I stress “in hindsight” because the prices did not all go down together for these grain and oilseed crops. You saw one or two come down initially, and if you did not get out of those crops and get into others, then your income went down very early.

Mr. Gar Knutson: The reason we have this three-year averaging—and we're basically saying if you've been a long-suffering prairie grain farmer, we can't help you—

Mr. Douglas Hedley: In AIDA.

Mr. Gar Knutson: Yes, in AIDA. Your point is that we have to have that to be compliant with the WTO. Is that right?

Mr. Douglas Hedley: Let me be very clear here. You can choose any average you wish, but to remain green, or non-countervailable, in annex two of the WTO, you have only the two choices, the three-year average or the Olympic average.

Mr. Gar Knutson: Was your point earlier—I don't want to put words in your mouth—that the Americans can put in programs that, on the face of it, are non-compliant because they know we won't complain or it's not in our interest to complain, so they don't have to pay as close attention to WTO rules?

• 1005

Mr. Douglas Hedley: Their programs are compliant with WTO, but they are not necessarily green or, in other words, non-countervailable.

Mr. Gar Knutson: Couldn't we use whatever they're doing as a shield, not a sword? If they're doing it, presumably we could do it too and at least be relatively safe. They're not going to complain or countervail us, because we can say we're just copying what they're doing.

Mr. Douglas Hedley: There is no principle or written statement within the WTO that says you can't complain if you're doing it yourself.

Mr. Gar Knutson: I'm a lawyer, and I don't mean any disrespect, but that's a lawyer's answer. In reality, do you think they would launch a complaint if we just copied one of their programs?

Mr. Douglas Hedley: If they felt that program was hurting their own producers, they certainly would.

The Chair: You have one minute left.

Mr. Gar Knutson: Why do you think you're not getting the complaints in Ontario? My sense of last year was that they had lousy prices but good yields, and this year they're not good yields because of the really crummy weather in July, when it was terribly dry.

Mr. Douglas Hedley: I honestly don't know. First of all, you have a much more diversified farm base in Ontario than you do in western Canada, so as a farmer you have more places to run, if you wish, when prices go down.

Mr. Gar Knutson: But even the big corn producers had good yields last year, didn't they?

Mr. Douglas Hedley: Yes.

Mr. Gar Knutson: That wasn't the case out west.

Mr. Douglas Hedley: They had good yields last year and they've brought in nearly a bumper crop this year in terms of volumes.

The Chair: Madame Alarie.

[Translation]

Ms. Hélène Alarie: I'm intrigued by the numbers for Saskatchewan: 17,000 applications and only 7,000 deemed eligible.

Could we possibly get a breakdown of the companies that were among the 55% of applications rejected? Are we talking about large or small farms? Who are these producers?

The industry is so threatened that I fear thousands of producers are facing bankruptcy. If that's true, it may cost considerably more to relocate or retrain these individuals than it would to change the AIDA program eligibility criteria to make them more flexible.

Can you tell me who these people are?

[English]

Mr. Danny Foster: In Saskatchewan these are mainly grains and oilseeds farms, smaller farms, probably 500 acres, and some larger farms at 1,000 or 2,000 acres. It really depends on the circumstances that the individual farm faced in 1998 as to whether or not they are eligible for a payment under the AIDA program. You can't come up with any generic description of the farms that are rejected versus the farms that get a claim. We get a mix of both. We get mixed farms getting payments; we get mixed farms not eligible for payment. It's the same thing with the grains and oilseeds or hog production. There's a variety.

What I will say is that on the rejected claims, 60% of the producers who weren't eligible for a payment had a claim year margin that was simply higher than their reference margin. For about another 40%, their claim year margin fell between 70% and 100% of their reference margin. The way the program works, the bottom line is that these people had claim year margins higher than their support level for 1998. You can't say “This is the type of farm that's not eligible”; it's subject to price, weather, and input costs, and each farm is different.

[Translation]

Ms. Hélène Alarie: I have no further questions.

[English]

The Chair: Mr. Hedley, did you want to say something more about that?

Mr. Douglas Hedley: Yes, if I may, please.

Madame Alarie, your question is an excellent one. We have spent a good deal of time trying to figure out the demographics of the farms in Saskatchewan, in Manitoba, and indeed in Alberta, in order to try to identify the source and nature of the problem. We have a good deal of that information, and Chair, I would offer it to you for your committee, if you wish. I don't have it with me. We will need to package it and get it to you, if you wish. There are a good deal of demographics on western Canadian farmers.

• 1010

The Chair: Yes, we'd be more than happy to accept that.

Go ahead, Madam Alarie. Oh, is that it?

[Translation]

Ms. Hélène Alarie: Yes.

[English]

The Chair: Okay, thank you.

Mr. McCormick.

Mr. Larry McCormick (Hastings—Frontenac—Lennox and Addington, Lib.): Thank you, Mr. Chair.

Thank you, gentlemen, for being here.

I once heard someone say statistics showed that approximately 1,000 farmers in the prairies went out of business each year. Often they're selling out and changing their lifestyle. It's a fact of life that operations get larger, and they do that here in Ontario: large operators buy out the retiring people. But now I hear 7,000 to 8,000 operators may go out of business this year. I'm sure you people have access to much more information than I do, and I just wondered what you've heard and what your estimates show on that, Mr. Hedley.

Mr. Douglas Hedley: Mr. McCormick, first of all it's very difficult to find in the demographics this number. There is no magic number here.

We've looked at those approaching the farm debt mediation and consultation boards in the provinces. We find a little bit of increase, but we're talking about really small numbers, and we can share those with you as well, if you wish. We've talked to the banks and we've talked to the input suppliers, and indeed no one can tell us there is a significant difficulty in recovering production credit in the prairies this year, or anywhere else in Canada. As a result, it's very difficult to identify them.

If you look at the number with very low NISA accounts, small farms with relatively low margins, that number starts to be in the order of what you're talking about, many of which are still viable farms in the long run.

Mr. Larry McCormick: The long run is the story, of course—whether these individual operators can exist and survive until that time. Mr. Foster said each farm is different, and we agree, but the commodity price is a worldwide situation. When each farm is different, and yet we have this one rule that applies to all, and when I see that 60% to 70% of the claims processed are not paid, are not valid....

I read the newspaper, and a lot of officials and politicians are coming here to this town this week from Manitoba and Saskatchewan. If more money—whether a very few dollars or any dollars—were to ever be made available, where would these people be whose claims have been denied? Is this a straight political decision? These people have fallen through the cracks. These are real people. You know what's happening and we know what's happening, and I don't think we're addressing it.

Mr. Douglas Hedley: Mr. McCormick, I'm sorry, I can't answer your question. You're asking me to speculate on how one might change the program, and I can't do that.

Mr. Larry McCormick: Okay, but under the present policy, then, there's no way for the people who have been denied to access money under this program.

Mr. Douglas Hedley: That's correct. They do have access to the 1999 program right now, where the federal government is delivering it, with the 1999 interim form. That form has been out on the web and available since about Labour Day. We now have written forms out and available to farms so that they can take an advance on their 1999 payment.

Mr. Larry McCormick: In closing my comments and questions, “perception” seems to be the word I've learned in my six short years here. Now we hear the perception that banks have been relatively fair to these producers. We're hearing the perception that the Farm Credit Corporation has not been as fair. Does it come under your jurisdiction to work with all the arms of government as possible, Mr. Hedley?

Mr. Douglas Hedley: Could I ask for clarification on this distinction between banks and FCC? I'm sorry.

• 1015

Mr. Larry McCormick: I've talked to producers in Manitoba and Saskatchewan and have followed these stories until now, and the word is that the banks are surprising us by meeting with these people and working with these people. But Farm Credit is taking a very firm rule, and there's not as much flexibility in demanding money, as per our arranged schedule when commodity prices were greatly different from what they are today.

Mr. Douglas Hedley: Jacques Lagacé is here from the FCC, and I would ask him to come to the table as well, but let me briefly outline a situation that is emerging in western Canada with the FCC.

You may recall that in the late 1980s there were a number of farm foreclosures, and in doing that, the FCC took land back, as did other creditors, on 10-year leases that were made available to those farmers. Many of those 10-year leases run out late this year. The FCC has been working day and night to try to close off those leases with all of the individuals and is hoping to get that done before they fully run out this fall. That has been creating some news. I understand that.

If Jacques Lagacé can offer us further information, I'd certainly ask him to do so.

Mr. Larry McCormick: Thank you.

The Chair: Go ahead. You can answer the question as you understand it.

Mr. Jacques Lagacé (National Director, Government and Industry Relations, Farm Credit Corporation): If you don't mind, I'm going to answer it in French.

The Chair: Fine, go ahead.

[Translation]

Mr. Jacques Lagacé: The FCC provides long-term loans. As for the current agricultural income crisis, it does not make loans for operating purposes. The best indicator of the state of the sector is the extent of the lines of credit awarded.

That being said, more and more producers are in arrears in their payments to the FCC. Nationwide, as of last September, payment arrears had increased by about 20% over the end of September 1998.

With respect to payment arrears in the Prairie provinces, these increased by 75 per cent between September 1998 and September 1999. However, some caution is in order. In 1998, the level of payments in arrears was rather low. The increase has been in the order of $6 million on $2.2 billion in crop production. The bulk of the payments owed comes due on November 1 in Manitoba and Saskatchewan, an amount totaling $85 million. We will be in a better position to gauge the impact of the current income crisis on our accounts by late December or early January, but we anticipate that the level of payment arrears will increase.

[English]

The Chair: Thank you.

Mr. Proctor.

Mr. Dick Proctor: Thank you very much again, Mr. Chair.

Mr. Hedley, coming out of the 1993 GATT Uruguay Round, all of the signatories to that agreement agreed they would reduce their domestic support payments by 20% over five years. Canada, in its wisdom, decided—and this is a factual, accurate number—to reduce its support payments by over 60% during the same period. Do you think it was a good idea to have reduced that much? And did the department caution the politicians that perhaps we should be going in concert with our competitors, as opposed to jumping so far out in front in slashing support payments on domestic agricultural products?

• 1020

Mr. Douglas Hedley: First of all, I don't think my personal view matters very much. But in the period as we come through the end of the WTO, what that agreement gave us was an upper limit on what countries could do in terms of direct support to farmers internally, in their own economies. Yes, Canada brought it down substantially—I believe it was about 60%—from the current cap that we have, but at the same time, Canada was facing a series of other issues, one of which is a very serious deficit problem and long-term debt for the country, and the restructuring in the economy that is taking place in response to technology and communications in particular.

Mr. Dick Proctor: So you're acknowledging, in effect, that a lot of the decision to pay down the debt and have a balanced budget as quickly as possible was loaded onto the backs of the farm community.

Mr. Douglas Hedley: There were cuts all the way across government. I can't comment on the balance across sectors or regions of the country. I don't have that information. But it did affect all departments and areas.

Mr. Dick Proctor: It was said here earlier today, Mr. Hedley, that the Canadian treasury simply can't afford to compete with the Europeans and the Americans and others. We know that only 6¢ of every dollar of wheat sold in Canada is eligible for any subsidy, compared with 38¢ in the U.S. and 56¢ in Europe. I would counter that by noting that on some supply management commodities we see Canada competing at a level equal to, and sometimes higher than, our competitors. Would you not agree that some of this is cherry-picking, that we have picked on the grains and oilseeds but we've left some of the supply-managed sectors relatively alone, and that we've kept those subsidies and support payments high?

Mr. Douglas Hedley: First of all—

Mr. Dick Proctor: I'd like a level playing field there.

Mr. Douglas Hedley: —you have drawn a comparison to the United States and Europe. We can talk about numbers there. We rely on the OECD numbers on PSEs and the WTO numbers on IMSs for country comparisons. I'd also draw your attention to Australia and New Zealand, which indeed have levels of support below that of Canada in the grains sector.

With respect to the comparison between the grains sector and the supply management sector, I think we're really dealing with quite different sectors. First of all, the grains sector in Canada—grains and oilseeds and special crops—has been an export sector from this country for many years, and it indeed predates the formation of the country. The supply management sector is essentially a domestically oriented market only. There are some exports, but they're very, very small. The primary objective is to serve the domestic market. Those are consistent with the sectoral positions on trade and trade negotiations, as they have been on the last round and as they have been in the position the minister has announced for the WTO round coming up in November.

The Chair: Thank you.

Mr. Steckle.

Mr. Paul Steckle (Huron—Bruce, Lib.): I missed some of the questioning in my absence over the last half an hour or so, but I want to pick up where I intended to begin this morning and then focus my thoughts and my questioning around the issues of Ontario.

The whole question of year-end has been a big issue for me in my riding, and I think that needs to be thoroughly thrashed out. How are we going to deal with those people who had a February, a March, perhaps even a June or July year-end? Where are they going to pick that up, given that this program ends, as we originally were led to believe it would, on December 31, 1999? Where do they pick that up? Can we go back in retrospect, or can we project, or how are we going to do that?

That's my first question. Perhaps you should respond to that and then I'll get into my next question.

Mr. Douglas Hedley: Very briefly, year-end has been a problem wherever we use tax years as the basis for a program. We have it in NISA, and we're moving now to simply a tax year basis in NISA.

Danny, what is our progress in dealing with the tax year-end issue in AIDA?

• 1025

Mr. Danny Foster: For federal delivery it's covered off. It means producers do not have to wait until December 31, 1999, to file a corporate year-end form for AIDA purposes. That's now part and parcel of our ongoing processes. We can now take a year-end that's filed on January 31, 1999, and process it for the 1999 stabilization year, so from a filing standpoint that's covered off.

Mr. Paul Steckle: So someone who had a June 30 year-end would have lost out. The margins would have been substantially different for that person compared to someone who was able to calculate his year-end based on the full calendar year for 1998, based on margins. That is substantial. That farmer has lost out simply because his accountant has chosen to have him submit his year-end other than on a different calendar year. That's a serious problem. I still cannot go back to my farmers and say “Listen, this is how we're going to do it.” I think somehow we have to.... We're running to the end of this program and we still haven't resolved this issue.

The other issue relates very closely to that, and it's how we do the accounting procedures. We have an accrual method, which was the method the Province of Ontario advised farmers to go on. A farmer received money based on accrual, found out later that they had to go to a cash basis, and found out that there was money requested back. How do we deal with that issue? We were told in the beginning that industry-acceptable accounting practices were to be used. What are industry-acceptable accounting practices? What is modified accrual? That's a term. If it's an engine, I know what that means; if it's modified farming practices, I guess that's one thing. But what's modified accrual?

Mr. Douglas Hedley: First of all, in terms of the program, the farmers can file in either cash or accrual methodology. Both are available under the Income Tax Act. However, one can manipulate the program if you do not adjust for inventories in the year in question—in the reference margin, not necessarily; that's past history. But clearly, in the year in which a claim is made, you can adjust, before that year ends, the amount of inventory you have and hence affect your claim.

So we do require an adjustment for inventory. That is what is referred to as the modified accrual. However, if farmers wish to apply for the program completely in accrual terms, we handle that as well.

Mr. Paul Steckle: The problem arose because the farmer had received his money—in this case, $72,000—from the province. He expected another $90,000 in federal money, based on the 60-40 factor. Later, before he received any money from the federal side, or what was deemed to be federal money, he received a request for $4,800 back. Well, in fact what happened is that the province clawed back their overpayment portion on the backs of the feds. So we gave him nothing. In his mind, the federal government gave this farmer absolutely nothing, but in fact we did give him 60% of what he got.

This is the whole mythology in Ontario, that somehow the feds haven't come good on their promises.

Mr. Danny Foster: I'd like to make one point in terms of the overpayment. In fact the overpayment is not stemming from the change in accounting; it's stemming from the fact that Ontario has gone out and told producers they can apply for an advance before they've filed their taxes and have done all their books for the 1998 stabilization year, in this case. Then when the producer comes in later with the actual numbers, we find out that they're in an overpayment situation.

Where Canada is delivering federally, Manitoba and Saskatchewan, we have the 1999 interim payment process and application now available. We've gone to great lengths to make sure we're getting the best numbers possible, so that we don't end up in an overpayment situation once we've made that interim payment to producers. That is a problem we've faced in Ontario with the delivery.

The Chair: Mr. Hilstrom.

Mr. Howard Hilstrom: Thank you, Mr. Chairman.

I think it's becoming clear that there's quite a hodgepodge of programs in terms of how things work from province to province there, and that's certainly not encouraging.

I have a couple of questions here. I was surprised when you said that the U.S. could do that acreage-based payment thing and Canada couldn't, of course. Was it never brought up that Canada had also made acreage-based payments in the past?

Mr. Douglas Hedley: Those acreage-based payments were made prior to the signing of the WTO agreement in 1994.

• 1030

Mr. Howard Hilstrom: Okay, so they didn't count. The average payout is around $10,000 or $11,000 or whatever. I think it would help if you clarified this and told us exactly how much was the biggest cheque ever written to an individual farmer and exactly what was the biggest combination of five cheques written to a corporate entity. Could you give me those figures?

Mr. Douglas Hedley: First of all—

Mr. Howard Hilstrom: The single cheque.

Mr. Douglas Hedley: —I would be very surprised if we would be allowed to release the information on an individual.

Mr. Howard Hilstrom: No, I wouldn't want an individual...what's the biggest cheque that anybody got?

Mr. Douglas Hedley: It may be identifiable. We will look at that. What I would propose is that we have a look at the distribution of payments generally, by province if you wish, where we're delivering it.

Mr. Howard Hilstrom: Okay. I'd ask you to supply that to the committee voluntarily; otherwise, I'll try the access to information office.

Earlier, in response to Madame Alarie, you referred to the two and a half years of building this program. Right up to December 1998, the minister consistently said that NISA and crop insurance were taking care of this. Then in December he said okay, now we have this program. But the way it's working, to me it doesn't look like anybody worked on it for two and a half years.

The other indication that this program wasn't really figured out or designed as a real long-term program is that the government designed it for only two years. Are you staying with the idea that this is a program that was designed for the long term or are you saying that AIDA is just for the short term?

Mr. Douglas Hedley: AIDA was based on a lot of discussion with provinces and farm groups over a long period of time, over two or two and a half years, I think. We were basing it on the Alberta experience and the P.E.I. and B.C. experiences. Yes, consideration is being given to it in the longer term. Certainly the National Safety Nets Advisory Committee is advising that the program continue for the longer term.

Mr. Howard Hilstrom: Okay.

Mr. Douglas Hedley: But we do not have authority for that at the present time.

Mr. Howard Hilstrom: That's what we need in agriculture: a long-term program. One has never been put forward. Certainly crop insurance has been put forward in that area, and NISA is a part of an effort, but we need that third leg on this whole thing.

Mr. Douglas Hedley: As for the rationale—

Mr. Howard Hilstrom: That's what I'm looking for.

Mr. Douglas Hedley: —behind that, if I may, let me recall that our long-term safety net agreement with provinces, which we have had since the early to mid-1990s, was running out. Indeed, it is currently expected to run out at the end of March 2000. When we put it in place, what we said to do was to put it in place to run through that period of time and then have a look at what package we need for the longer term federally, provincially, with farmers, as we renew the five- or seven-year agreement on safety nets. That's in part the rationale for why it was put in for two years.

Mr. Howard Hilstrom: Until that happens, we certainly want to try to keep these farmers who are now falling through the cracks in business, so I guess there will have to be something done in the short interim, which I hope the premiers can convince the government to do now.

There's one other thing you said that struck me as really funny. In questioning about the flooding in southern Manitoba and Saskatchewan, I believe you indicated that AIDA was designed exactly to deal with that. Or your words were to that effect: that AIDA was designed to deal with what I would call a natural disaster. Is that what you said?

Mr. Douglas Hedley: AIDA is designed to deal with natural phenomena as well as market phenomena. It is assisting the farmers in southeast Saskatchewan and southwest Manitoba. We have also put in place arrangements through crop insurance—jointly with the province in Saskatchewan—to assure that not only this year but in future years they have coverage of $50 per unseeded acre under crop insurance. We are still discussing that same arrangement with Manitoba.

Mr. Howard Hilstrom: I don't think AIDA was really designed for a natural disaster like that. Under AIDA, you do it by the year and you do your books by the year. Here we have input costs for fertilizer and fuel and all the things you do in the fall of 1998 to get your farm ready for the planting of 1999, but all of a sudden it's so bloody wet that it gets all wiped out and you lose it, and you're into 1999 and you can't put a crop in. There's no way that AIDA was designed for that. It was not designed for a natural disaster, and that's exactly what this was, wasn't it?

• 1035

Mr. Douglas Hedley: Well, just a moment. Earlier one of the members present indicated that it didn't work for those because they had long-time low margins. That's correct. It won't. But AIDA is designed to help precisely in the situation where you see a farm in good shape, coming along with a decent margin, where disaster happens quickly, and their margin falls.

Mr. Howard Hilstrom: Then why wasn't AIDA used strictly for the farmers in the ice storm in Ontario and Quebec? Why did they have to have a special program?

Mr. Douglas Hedley: The program didn't exist at that time.

Mr. Howard Hilstrom: Would it work the next time there's an ice storm down here, and there would be no natural disaster for any other part of the country?

Mr. Douglas Hedley: In responding to a natural disaster, the DFAA responds to asset loss, not income loss. AIDA deals with income loss.

Mr. Howard Hilstrom: What's fertilizer and fuel and all that? It's not an asset, but it's not an income thing, either. It's an input cost, and it's akin to an asset. It's inventory, or whatever you want to call it.

Mr. Douglas Hedley: As far as I know, Manitoba and Saskatchewan have asked for assistance through DFAA to the Minister of National Defence.

Mr. Howard Hilstrom: The whole purpose of my questioning is to try to clarify this for the general public and to make sure that the facts are out on the table. There's this constant spin-doctoring for people in the city here, that farmers are doing okay. They have $1 billion coming here, and they have AIDA, which is taking care of all of the problems. People believe that crap.

It's not helping everybody. It's helping some, and it's doing some good. I'm all for the government doing what it can, but in terms of the impression being laid out by the government members, and in fact you yourselves here right now, describing AIDA as being something that was designed to work for those farmers in southwest Manitoba and Saskatchewan....

You've answered the question, so I'll pass now, I guess, unless you have a further comment on it.

The Chair: You're out of time anyway. Thank you, Mr. Hilstrom.

Before we go to Mr. Borotsik, I think you put the federal portion of the projected AIDA payments for 1998 at $560 million. Am I right, Mr. Hedley?

Mr. Douglas Hedley: That's the total, I believe, Mr. Chair.

The Chair: That's the total, provincial and federal?

Mr. Douglas Hedley: Federal and provincial payments for the 1998 stabilization year, yes.

The Chair: Okay.

Do you have a figure on the total farm income drop in that year? If through AIDA we're coming up with, provincially and federally, $560 million, say, that will cover what portion of the total income drop? Do we know what the total income drop is? Is it $1 billion? Is it $2 billion? Is it $3 billion?

Mr. Douglas Hedley: Chair, I don't have in my head that number for all of Canada. If I look at Saskatchewan specifically, I believe Saskatchewan will be down between $200 million and $300 million from the five-year average for the 1998 year.

The Chair: Between $200 million and $300 million?

Mr. Douglas Hedley: Yes.

The Chair: And of the $560 million that goes to the entire country, what would be Saskatchewan's portion of that?

Mr. Douglas Hedley: About $170 million, plus NISA withdrawals.

The Chair: Which would be how much?

Mr. Douglas Hedley: In Saskatchewan, $200 million. That's our forecast at the moment.

The Chair: So $200 million plus another $170 million would be $370 million, right?

Mr. Douglas Hedley: Chair, I am—

The Chair: I'm just trying to follow you. What I'm trying to do is compare the payouts with the loss. According to your figures, the payouts under both NISA and AIDA could actually exceed, then, the projected drop in income in Saskatchewan. Am I right?

Mr. Douglas Hedley: Chair, the difficulty is that the number I have given you for 1998 in Saskatchewan does include the forecast levels of NISA and AIDA. So you can't simply take and add on to that forecast all of the AIDA money and all of the NISA money. Some of it is already embedded in that number.

The Chair: If you take just the two numbers, the income drop on one side and the payout under NISA and AIDA, what are they? Give me the comparison, that's all.

Mr. Douglas Hedley: If you count the payments that are not already in the forecast, you will bring Saskatchewan largely back to the level it was, of the five-year period for 1998.

The Chair: I see.

Mr. Borotsik, I don't know if you find that revealing, but go ahead.

• 1040

Mr. Rick Borotsik: Thank you, Mr. Chairman.

As you're aware, Mr. Hedley, I do value your opinion. You said perhaps your personal opinion wasn't important. It is important.

With respect to the AIDA program, as you're aware, in Manitoba and Saskatchewan we had a natural disaster. Over a million acres in my area wasn't seeded. You said the AIDA program as we know it was designed specifically for that because of the low margins.

There are two issues with respect to that. Number one, the program as we know it now doesn't cover negative margins. If a farmer has 2,000 acres and gets absolutely no crop off, I think negative margins probably will come into play. The second one is expenses that are not allowable under the AIDA form, and one of them is capital expense or land rental. If a farmer rented 2,000 acres of land at $35 or $40 an acre, he received his $50-per-acre payment, as you indicated before. Those land rental payments are not used as an expense calculation in the AIDA program. Therefore, the $30, $35, or $40 will not be recoverable in any way, shape, or form.

So how can you say that in that particular situation AIDA was designed for this type of natural disaster?

Mr. Douglas Hedley: Danny, could you take us through the expenses that are eligible or not eligible in AIDA, please?

Mr. Danny Foster: I think the fundamental question here is that the AIDA program includes capital expenses in the margin. So it's not an allowable expense, as you mentioned—

Mr. Rick Borotsik: It's not an allowable expense.

Mr. Danny Foster: —because the idea is not to influence buyer rent decisions.

Mr. Rick Borotsik: Thank you. I don't have a lot of time. I'm glad you said that because the answer was that this was exactly why AIDA was put in. It doesn't work that way.

In saying that, do you believe the AIDA program is in fact going to help those people who were not able to seed their land in the natural disaster area for the 1999 farm year?

Mr. Danny Foster: Absolutely.

Mr. Rick Borotsik: They have to cut $45 in income for land rent, which is not recoverable as an expense. You say they're still going to be able to put a crop in next year.

Mr. Danny Foster: I don't know if they're going to be able to put a crop in, but AIDA is there to help them with the income drop as a result of not being able to seed this year.

Mr. Rick Borotsik: Okay, but the expense of $45 per rental acre is not an allowable expense.

Mr. Danny Foster: Right.

Mr. Rick Borotsik: Well, I think the numbers will come out when you do your calculations with your verifiers.

We talked about the administration fees of $20 million. Canada also pays 60% of the administration fees for the provinces that are administering the program—Alberta, British Columbia, Ontario. Is that $20 million inclusive of that 60%?

Mr. Danny Foster: No.

Mr. Rick Borotsik: Could you table with this committee the administration costs that are currently being expended for the administration of the AIDA program?

Mr. Danny Foster: Sure.

Mr. Douglas Hedley: We can get those, yes.

Mr. Rick Borotsik: You will table those costs with this committee?

Mr. Danny Foster: Yes, and the $20 million is for the year.

Mr. Rick Borotsik: I appreciate that.

You also said AIDA was right for 1999, particularly in my area. How many advance payments have been made to the 1999 claim in the area affected by the natural disaster?

Mr. Danny Foster: In terms of the 1999 interim payment?

Mr. Rick Borotsik: Absolutely.

Mr. Danny Foster: Just a handful. We've probably got less than 50.

Mr. Rick Borotsik: Less than 50 claims submitted?

Mr. Danny Foster: Yes, submitted.

Can I just add one thing? With the agreement with Manitoba, there is a $50-per-unseeded-acre payment being made through the province. Of that, $25 represents an advance on the AIDA program. So money has already flown out to producers through the provincial government.

Mr. Rick Borotsik: And up to $50 per acre, upwards of $35 to $40 for acres required for maintenance and spraying of that particular land. How much has gone back into the farmers' pockets? I know each farm is individual, Mr. Foster. I understand that. I guess the point I'm trying to make is AIDA is not as rich as you may seem to think going into the 1999 crop year for specifically a natural disaster area. I don't believe AIDA was designed to help that kind of a situation, and I've been asking the minister to try to come up with something else to assist those people.

Mr. Douglas Hedley: In considering the risks that farmers face across the board, I don't think it's fair to the programs, to the provinces, to the federal government, or indeed to the farmers to say that one program must solve all problems. It is the full panoply of programs that are provided. Let me point out that for crop insurance in the region affected by flooding in your province, only 11 farmers took unseeded acreage coverage. Had they had unseeded acreage coverage, they would have been able to get that from the crop insurance program.

• 1045

Mr. Rick Borotsik: Mr. Hedley, I don't think you should go there. The program the way it is designed right now is not conducive to taking unseeded acreage insurance, so I don't think we should go there right now. That's not to say the program shouldn't be improved to accommodate that.

Mr. Douglas Hedley: And we are trying to do that.

Mr. Rick Borotsik: As for the 11 people who bought the unseeded acreage, good for them. The fact is the program doesn't work, so let's change the program.

The Chair: Thank you.

Mr. McGuire has a question, and if we have more time, it will be Mrs. Ur.

Mr. Joe McGuire (Egmont, Lib.): I was just wondering if the safety nets committee measured the impact it would have, including negative margins, on the number of applications that have already been processed. Would those who have get more, or those who have nothing get a little? Was any number-crunching done to see if that would happen?

Mr. Douglas Hedley: I have the numbers in my head for all of Canada. I can get it broken down by province possibly; I don't know.

It would appear that somewhere between 30% and 40% of those receiving a payment would receive an additional payment if negative margins were covered. In terms of whether or not there would be additional people, not currently covered under AIDA, who would be eligible if negative margins were covered, we would only expand the number of people by about 2%, 3%, or 4%. The reason for that is if you don't get a payment on your positive margin, it's kind of difficult to have a payment on your negative margin.

There are some circumstances where positive margins are relatively low and they may not have claimed, so if you did pay on negative margins, they would be entitled to a payment but had not claimed or did not have a payment on the positive margin.

Mr. Joe McGuire: Were those payments calculated on just the federal portion? We know some provinces will never pay negative margins, but was that just paid on the 70% of negative margins, or was that 100%?

Mr. Douglas Hedley: It doesn't matter. If you pay on any percentage of negative margins, you will be adding money to those who have already received it. About 30% to 40% of those who would receive a cheque from their positive margin would also get a cheque for their negative margin.

Mr. Joe McGuire: Do you have an average amount of money for that extra payment? Is it significant?

Mr. Douglas Hedley: If you pay the federal share of 50% of the negative margin, the cost to the federal government is approximately $110 million to $115 million. If you pay the federal share of 70% of the negative margin, the cost to the federal government is $210 million. At 100%, it's over $300 million.

Mr. Joe McGuire: That's on 1998; that's not next year.

Mr. Douglas Hedley: That's on both years.

Mr. Joe McGuire: That's on both years?

Mr. Douglas Hedley: That's an estimate only.

Mr. Joe McGuire: So we could save some people. Some farmers could theoretically make it or be able to survive for some time, if negative margins—

Mr. Douglas Hedley: Yes, 30% to 40% would receive a larger cheque.

The Chair: Thank you.

Mrs. Ur and I think Mr. McCormick, although he's not here, have a couple of questions.

Let's go to Proctor first and then we'll come back to you.

Dick.

Mr. Dick Proctor: Thanks very much.

Mr. Hedley, you indicated that the income drop in Saskatchewan in 1998 was forecast to be $200 million to $300 million. Does the department have any projections for the 1999 income drop?

Mr. Douglas Hedley: The forecasts we made in July 1999 show that realized net farm income in Saskatchewan would be negative $48 million. The five-year average for the period 1994 to 1998 is I believe around $689 million. I can check that number exactly, but I'm within a few million.

• 1050

Mr. Dick Proctor: Just so I understand, the five-year average is $689 million and the forecast for this year in Saskatchewan is minus $48 million. Is that correct?

Mr. Douglas Hedley: Yes, but I would also point out that that was made before some prices started to improve, and I would flag for that cattle and calves. There is some improvement in durum prices. We anticipate that that number will come up somewhat. It also does not count the much higher NISA withdrawals we're seeing. That forecast was based on a standard NISA year with relatively low withdrawals. We're seeing withdrawals at two and a half times normal.

Mr. Dick Proctor: The earlier part of the answer, Mr. Hedley, leads into my last question, which is this. Does the department see any longer-term recovery, particularly on the grains and oilseeds but generally speaking on the commodity prices? Is there any hope out there for our farmers?

Mr. Douglas Hedley: As you well know, grain prices are extremely difficult to project more than a few months. All of our projections are based on normal crop yields and prices around the world, no disasters, and no major policy change. We don't see a lot of improvement for the year 2000 and a little bit for 2001.

I'd also come back to the point that we have seen four back-to-back bumper years in the world for grains and oilseeds, and we have never seen four in a row since the Second World War. The longest it has been is three. We also know that spikes occur suddenly. I recall 1973 when they went up in about a three-month period. We also saw the spikes in the 1980s and early 1990s. I can't predict phenomena that are driven by catastrophic weather, policy change—all of those things. What we do know is that with normal yields and reasonable markets they're going to come up slowly.

The Chair: I think we have short interventions from Mrs. Ur and Mr. McCormick.

Mrs. Rose-Marie Ur: Thank you, Mr. Chair.

The grain farmers in Ontario have a concern regarding covering negative margins, to say the least. How can you assure them that if AIDA does cover negative margins it won't hurt their companion programs?

Mr. Douglas Hedley: Let me accept your hypothesis and answer it only under that hypothesis, because I can't say if negative margins would be covered or not.

Mrs. Rose-Marie Ur: No, and I agree.

Mr. Douglas Hedley: First of all, let me take you back to the concern between say crop insurance and AIDA. If you cover 100% of negative margins, then clearly there is an impact on the crop insurance program. There is no reason to take it in many instances. It weakens the need for that program, and that is a cost-shared program with farmers and provinces and the federal government. AIDA is only governments. Clearly there are some incentives there.

However, if you have zero coverage of negative margins, you do not have that same problem. If you are somewhere in the middle, then you bear some risk—if it's 50% or 70%, or whatever number, coverage of negative margins. At the same time, I think what one would have to do in the long term is work very carefully to assure or audit that one program was not undermining the other, and we would have to find rules to apply, both at the individual farm level and at the program level, to make that happen.

Let me again point out that for the 1998 and 1999 years, all of the crop insurance decisions are taken; they're passed. You cannot influence those with the AIDA program if you cover negative margins for those two years.

Mrs. Rose-Marie Ur: One last quick question regarding the appeals board that you say may be set up. What would be the purpose of setting it up, as Mr. Hedley has said, if the case is closed? If those people have been rejected, would they be able to go back to the appeals process or...?

• 1055

Mr. Danny Foster: Yes, if they didn't agree with an interpretation of the rules made by the staff. But they're going back and asking if the verification staff or the reviewer made the proper interpretation of applying the program's terms and conditions.

Mrs. Rose-Marie Ur: Would this be a costly venture for a farmer? They can't afford this in the first place.

Mr. Danny Foster: Well, there's no charge, but the farmer would have to submit their arguments, saying this is why they disagree with the decision made by the administration.

Mrs. Rose-Marie Ur: How quickly will this get set up?

Mr. Danny Foster: We're hoping within the next month. We're targeting to have this set up within the next month. Now, there are separate review boards within each province, so Ontario has—

Mrs. Rose-Marie Ur: Who would sit on this? What kinds of people are you putting on these boards?

Mr. Danny Foster: Basically farm debt management and producer types of people, not administrative staff.

Mrs. Rose-Marie Ur: Okay, people who understand farming, I hope?

Mr. Danny Foster: Yes, exactly.

Mrs. Rose-Marie Ur: Thank you.

The Chairman: Larry McCormick.

Mr. Larry McCormick: Very quickly, because Rose-Marie just asked my questions.

Farmers are busy producers, and they may have overlooked some evidence or whatever. Anyone could appeal, and besides not costing them a lot of money, that's good. But we would need these appeals to move along quickly. We wouldn't want them to get related to the Canada Pension Plan or something. It's not far down the road before our producers are looking at input costs again.

Mr. Danny Foster: I should point out that I would expect we'd have very few appeals. The experience of Alberta and P.E.I. has shown that most of these things are worked out with the administration. If a producer wants to raise an issue, we'll look at it again before we take it to an appeal, because it is a costly process to appeal.

Mr. Larry McCormick: And I hope we're making producers aware of that in the media, as we've invested a lot of other money for that.

Thank you, Mr. Chair.

The Chairman: Paul, very quickly.

Mr. Paul Steckle: If we were to go back and redress these claims and go to a 70% negative margin, in your best guesstimate, without adjusting the program, is there enough money in the program to accommodate the required differences?

Mr. Douglas Hedley: At the present time, we have available up to $900 million for the two years. If we run the program the way it is right now, with no changes to it, we expect to consume all except about $40 million to $60 million of that. Therefore, if we were to cover negative margins, we would need money in addition to the $900 million.

Mr. Paul Steckle: My earlier recollection of numbers was that we would have money left over in excess of $40 million.

Mr. Douglas Hedley: Roughly $40 million to $60 million. We're still dealing with estimates here for 1999.

Mr. Paul Steckle: At 70% we would need roughly another $100 million. Is that close?

Mr. Douglas Hedley: Well, the numbers I gave you were that if you cover the federal share of 50%, it will cost the federal government between $110 million and $115 million.

The Chair: For the two years.

Mr. Douglas Hedley: For the two years. If you go to the federal share of 70%, it will cost around $210 million. If we have $40 million to $60 million left over, you're going to need somewhere between $150 million and $170 million more. It's a simple deduction.

Mr. Paul Steckle: It's on the record. That's all I wanted.

Mr. Douglas Hedley: And that's still forecast.

The Chair: Apart from the generosity of the program or the lack of it, Mr. Hedley, would you foresee fewer bumps on the road in 1999, in that farmers have now been exposed to the program, they've seen the forms, and they've had some experience with the program? Do you think some of the start-up pains, as we could call them, will be avoided for the year 1999?

Mr. Douglas Hedley: Yes, Chair, I strongly believe that. Let me base it, first of all, on the NISA experience, where we started with an extremely lengthy form. We have it down to one that's quite simple, well understood by farmers, and working extremely well. With the AIDA program, we can start to make that same streamlining for farmers.

The Chair: The other thing is that you were mentioning it was August that was top-heavy with the applications, right?

Mr. Douglas Hedley: Right.

The Chairman: Given that the tax year-end, or at least my tax year-end, is the end of April, then for the 1999 year—in other words, next year—would you expect the applications to come in much faster and that they would be dealt with much more quickly?

Mr. Douglas Hedley: Chair, all of our experience suggests we will get the vast share of them as we approach the deadline. I'm sorry, that's true of almost all of our programs.

The Chair: That's human nature, is it?

Mr. Douglas Hedley: Yes.

• 1100

The Chair: I see. Well, here's to human nature.

Thank you very much. We appreciate this information. I'm sure this saga will continue for some time, but we appreciate your information.

This meeting is over.